I don't know about photosop, but in fireworks you could create one file with all the letters, and just group them (one group for the fill, one for the outline, and change them all in once).
You'd then have to add slices, and export it (like PAPER MARIO_color_ABCDEF.png), next step is to run a renaming tool and change 'color' to the id of the palette.
Why di you choose to use Photoshop instead of illustrator? (By the way, just an idea, but you could try to make Watt's body (the round thing + pacifier) have the strong outline, and make the sparks and his glow have the 'inner' outline.)


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